EBay has the cash and should buy the Clippers

Opinion: Why not make an acquisition that will only grow in value?

SAN FRANCISCO (MarketWatch) — Few companies would seem to know the benefit of seeking out a good deal, an acquisition if you will, better than eBay Inc.

After all, eBay
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was born almost 20 years ago with a business philosophy based around people digging up stuff from grandma’s attic, putting it up for auction online, and letting consumers bid. Sometimes, this drove up the price for something, but usually it left the auction winner feeling as if he or she had gotten a good deal on the bounty.

So it should probably not come as a surprise that a company based on acquisition transactions would be looking to do some itself. EBay Chief Executive John Donahoe and Chief Financial Officer Bob Swan said as much on a conference call with analysts after the close of trading on Tuesday, when discussing that it took a $3 billion noncash tax charge in the first quarter, a move that will help eBay increase its available cash in the U.S. by $6 billion, to approximately $8.2 billion.

Based on comments from the eBay executives, the company is looking to use that cash on some deals in America.

“We’re an acquisitive company, and we need to ensure we have the resources available to capitalize on targets that become available both domestically and abroad,” said Swan, who added that, while eBay wasn’t ready to announce any “large U.S.-based acquisition,” it is “ensuring we have the capital available for U.S. needs.”

So what should eBay buy in the U.S. of A.?

Sure, it could go out and buy another payment-processing company like PayPal, or Braintree. It could go scoop up Groupon Inc.
GRPN, +2.32%
and take a smaller e-commerce rival out of the market while capitalizing on that company’s loyal customer base and brand-name appeal. It could even buy some retail space and launch its own line of eBay stores and take a cut of every time someone comes in and buys something found from grandma’s proverbial old attic.

EBay could do a lot of things with its U.S. cash. ... Just don’t make a mistake and buy Skype. Again.

EBay was born when founder Pierre Omidyar thought outside the box and helped launch the e-commerce industry. The company needs to do something equally creative again. Something that no one would see coming, might seem crazy at first, yet with only a little attention could, even a couple of years down the road, pay huge dividends if eBay were to choose to sell the asset.

With all that in mind, eBay should buy the Los Angeles Clippers.

Reuters

Banned for life: L.A.Clippers owner Donald Sterling

By now, everyone who isn’t even an NBA fan knows what’s going on with the Clippers. On Tuesday, NBA Commissioner Adam Silver banned Clippers octogenarian owner Donald Sterling for life from having anything to do with the team and the NBA following the disclosure of racist remarks Sterling made to his ex-girlfriend. Silver also fined Sterling $2.5 million, and said he fully expects to get the support of the 75% of NBA owners he needs to force Sterling to sell the team.

Yes, Sterling might yet put up a fight to keep the team, but it’s hard to believe that even he, known for never selling anything, especially real-estate holdings, would seriously try to keep the Clippers at a time when he has supplanted al-Qaeda as Public Enemy No. 1 in the eyes of most Americans. EBay may face other bidders, but bidding is in eBay’s blood, and few things are more ripe to be bid on than one of the few franchises that exist in one of the most popular sporting leagues in the world.

Sure, the starting bid for the once-woeful-and-now-darlings-of-L.A. Clippers will probably be around $700 million. But the final price tag for the Clippers would be like sand off a beach when you have $8.2 billion in your checking account. Also, eBay could leave the Clippers alone and let them rot, as Sterling did for the better part of three decades, and the return on the company’s investment would eventually be enormous. Keep in mind that Sterling paid just $12.5 million for the Clips back in 1981, and the team has been valued now at, get this, $525 million. That’s a 4,100% increase for those keeping score at home, for a team that has had 26 losing seasons under Sterling’s ownership.

EBay could basically fall down the stairs with the Clippers and have a better track record than the team has had with Sterling. Plus, the publicity of coming in and saving the team from the clutches of Sterling would be unmatched. EBay would automatically become the NBA’s best Good Guy, and CEO Donahoe would be the crown prince of the league.

And if worse came to worst, eBay could always sit on the Clips for a couple of years, let the team’s value increase, and then put it up for sale. On eBay.

Oracle Corp.
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Larry Ellison has longed to own an NBA team; he could easily meet whatever reserve price eBay would set and, salary cap aside, still have plenty of cash to sign Chris Paul and Blake Griffin to lifetime contracts.

EBay said it wants to make acquisitions here in the U.S. Nothing would be more timely and unique than for the company to buy the Clippers. NBA Commissioner Silver would probably email over the paperwork to get the deal done right now.

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